- We maintain our BUY
rating on RHB Capital Bhd (RHB Cap), with an unchanged fair value of
RM8.90/share. This is based on an FY13F ROE of 12.3%, and a fair P/BV of 1.4x.
- Listed Malaysia
Pacific Corporation (MPCORP) has announced that it had on 8 March 2013 received
a letter from the advocates and solicitors acting on behalf of RHB Bank Bhd
(RHB) that MPCORP had defaulted in repayment of principal sums and interest in
respect of certain banking facilities. These loans total RM97mil.
- MPCORP had stopped
servicing its interest payments for past 5 months. MPCORP had offered to
negotiate for a full settlement pending talks for a suitable joint-venture partner
for its commercial building or sale of it, which has taken longer than
expected.
- Online news portals
reported that MPCORP’s main asset is its commercial building Wisma MPL, which
has reportedly been pledged to RHB for RM80mil. MPCORP disclosed that Wisma
MPL’s valuation is RM300mil based on its latest revaluation date on 20 August
2010.
- Our take is there
is no impact on reported gross impaired loans, as we expect the amount to have
already been classified as such, given that there had been no payment of
interest instalments over the last few months.
- In addition, there
is no additional loan loss provision required. Assuming the office building has
been pledged, the reported valuation amount of RM300mil is much higher than the
debt value of RM80mil. Thus, there is no requirement for any additional loan
loss provisioning, under FRS139.
- Recall the company
has guided earlier that credit cost will likely be at a more normalised level
of 25bps to 30bps for FY13. Our credit cost assumption is 31bps for FY13F (FY12
was exceptionally low due to good recoveries, at 14bps).
- This means a loan
loss provisioning level of RM362mil for FY13 (FY12: RM148mil). We remain
comfortable with our credit cost and loan loss provision assumptions, despite this
news of default by MPCORP.
- We remain positive
on RHB Cap and maintain BUY. Finally, based on MPCORP’s announcement and the
latest annual report, there does not seem to any other bank involved.
Source: AmeSecurities
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